Opinion
CIVIL ACTION NO. 3:00-CV-1801-G
December 15, 2003
MEMORANDUM ORDER
Before the court are the following motions: (1) the motion of the defendant and counter-plaintiff Matisse Capital Partners, LLC ("Matisse") to enforce a supersedeas bond posted by plaintiff and counter-defendant American Realty Trust, Inc. ("ART"); (2) the motion of Matisse to expedite consideration of its motion to enforce; and (3) the motion of ART to strike Matisse's motion to enforce. For the reasons discussed below, Matisse's motion to enforce is granted. Matisse's motion to expedite consideration and ART's motion to strike are denied as moot.
I. BACKGROUND
On September 17, 2002, this court entered a judgment as a matter of law ("JMOL") against ART and in favor of Matisse in the amount of $5,024,821.90. Memorandum Order (granting Matisse's motion for JMOL); Judgment (entered September 17, 2002). ART filed a notice of appeal from the judgment on October 8, 2002, and posted a supersedeas bond in the amount of $6,030,036.28 with Travelers Insurance Company ("Travelers") as surety. On November 19, 2002, this court approved the bond and stayed the enforcement of the JMOL. Order Granting Agreed Motion To Approve Supersedeas Bond (entered November 21, 2002). The JMOL appeal is still pending before the Court of Appeals for the Fifth Circuit; oral argument was heard in the case on November 4, 2003.
The purpose of a supersedeas bond is to protect the prevailing party from the risk of a later uncollectible judgment and to compensate the prevailing party for delay in the entry of a final judgment. Hebert v. Exxon Corporation, 953 F.2d 936, 938 (5th Cir. 1992).
On April 9, 2003, this court awarded attorneys' fees to Matisse in the amount of $1,162,446.50. Memorandum Order (entered April 10, 2003). ART filed a notice of appeal from the attorneys' fees judgment on May 7, 2003, and posted a second supersedeas bond in the amount of $1,395,000.00 (also with Travelers as surety). On June 9, 2003, this court approved that bond and stayed the enforcement of the attorneys' fees award. Order Granting Agreed Motion To Approve Supersedeas Bond (entered June 16, 2003).
The Fifth Circuit dismissed ART's appeal of the attorneys' fees award for want of prosecution on July 23, 2003, and issued its mandate the same day. Two days later, on July 25, 2003, ART filed a motion with this court to substitute a new bond ("the bond"), with Liberty Mutual Insurance Company ("Liberty Mutual") as the surety, for the two Travelers bonds; that substitution was approved by this court on the same day. After learning that the appeal of the attorneys' fees award had been dismissed, Matisse sent letters to ART, Travelers, and Liberty Mutual demanding payment of the attorneys' fees. Motion to Enforce at 3. These demands were unsuccessful. Id. On August 5, 2003, Matisse filed its motion to enforce, which included a motion for expedited consideration. ART filed a motion to strike on August 8, 2003, and a response to the motion to enforce on August 25, 2003.
Matisse states in its Motion And Memorandum In Support Of Matisse Capital Partners, LLC To Enforce Supersedeas Bond And For Expedited Consideration ("Motion to Enforce") that "this [c]ourt overruled the objections of Matisse" in approving the substitution of the Liberty Mutual bond for the Travelers bonds. Motion to Enforce at 3. In fact, Matisse filed no objections to the substitution — the only hint of opposition from Matisse to the substitution can be found in the Certificate of Conference filed with ART's Motion To Approve Substitution Of Supersedeas Bond And Release Current Supersedeas Bonds ("Motion to Substitute"), where ART's attorneys state that Matisse's attorney, Paul Ridley, "indicated that he could not agree to the relief requested because he had been unable to conference with his client." Motion to Substitute at 4 (Certificate of Conference).
This court held a hearing on the three motions on November 10, 2003. Before the hearing, it appeared that there was a question as to which surety — Travelers or Liberty Mutual — would be liable on the bond. Motion to Enforce at 3, 5. At the hearing, both parties stated that Liberty Mutual would be liable on the bond. See Transcript of Hearing on Defendant's Motion to Enforce Supersedeas Bond and Expedited Consideration and Plaintiff's Motion to Strike Before the Honorable A. Joe Fish ("Transcript") at 9, 14-15. Both parties also agreed at the hearing that the motion for expedited consideration and the motion to strike were now moot. Id. at 6, 10. The only motion left for this court to determine is Matisse's original motion to enforce.
Travelers has adamantly opposed any suggestion that it may be liable on the bond. See Travelers Casualty and Surety Company Of America's Opposition To Matisse Capital Partners, LLC's Motion For Expedited Consideration; Travelers Casualty and Surety Company Of America's Opposition To Matisse Capital Partners, LLC's Motion To Enforce Supersedeas Bond. On the other hand, Liberty Mutual has filed nothing in this court in relation to this case, but did indicate to Matisse that it "would not honor the [bond] claim until [the Liberty Mutual representative responsible for the claim] received a Court Order to pay the claim because ART's counsel Eric Redwine had instructed [the representative] not to pay the claim." Certificate Of Conference For Matisse's Motion To Enforce Supersedeas Bond at 1. Neither surety was represented at the November 10, 2003 hearing.
II. ANALYSIS
Matisse contends that the portion of the Supersedeas bond securing the attorneys' fees award became enforceable when the Fifth Circuit dismissed ART's appeal of the award on July 23, 2003. Motion to Enforce at 4; Supplement To Defendant Matisse's Motion To Enforce Supersedeas Bond ("Supplement to Motion") ¶ 4. Matisse also contends that this court does not have discretion to stay the enforcement of the bond. See generally Reply Brief In Support of Matisse's Motion To Enforce Supersedeas Bond. ART, on the other hand, argues that the bond is not enforceable while the appeal in the underlying case is pending, or, at least, that this court can and should use its discretion in staying enforcement of the bond while the underlying case is pending. Plaintiff American Realty Trust, Inc.'s Response to "Motion and Memorandum in Support of Matisse Capital Partners, LLC to Enforce Supersedeas Bond and for Expedited Consideration" at 6, 7.
The circumstances surrounding this motion to enforce — specifically, where a prevailing party moves to enforce an attorneys' fees award that has been unsuccessfully appealed while the appeal of the underlying case is still pending — present a case of first impression, but this court is not without some guidance. In In re Zapata Gulf Marine Corporation, 941 F.2d 293 (5th Cir. 1991), the Fifth Circuit was asked to determine whether Rule 62(d), F.R. CIV. P., authorized the district court to stay execution of the underlying judgment where the Fifth Circuit's mandate on that judgment had already issued, while an appeal of the district court's rulings denying the appellant's Rule 60(b) motions was still pending. After quoting from Rule 62(d), the court stated: "[c]learly the `stay' to which the rule refers is of the judgment being appealed." Zapata, 941 F.2d at 295. The Zapata court could have supported this assertion with the language in Rule 60(b), which explicitly states that a motion under Rule 60(b) — such as the motions still on appeal in Zapata — "does not affect the finality of a judgment or suspend its operation," FED. R. CIV. P. 60(b). However, the court chose instead to base its decision on the language in Rule 62(d). At the end of the opinion, the court concluded:
"When an appeal is taken the appellant by giving a supersedeas bond may obtain a stay subject to the exceptions contained in subdivision (a) of this rule. . . . The stay is effective when the supersedeas bond is approved by the court." FED. R. CIV. P. 62(d) (emphasis added).
The district court correctly identified Rule 62 (d) as the source of its authority to stay judgments pending appeal. As we explain above, however, that Rule gives the district court authority to stay only the order or judgment being appealed. The order [the respondent] seeks to appeal is the July 26, 1991 denial of its Rule 60(b) motions, not the underlying March 22, 1990 judgment.
Because the Federal Rules of Civil Procedure do not authorize the district court to stay the March 22, 1990 judgment, we GRANT the writ of mandamus and VACATE its order staying execution of that judgment.Zapata, 941 F.2d at 295.
The Zapata court's construction of Rule 62(d) has not met with any criticism in the dozen years since it was issued; in fact, the Fifth Circuit's construction of Rule 62(d) has been cited favorably by courts and treatises. See, e.g., Taylor v. Chevrolet Motor Division of the General Motors Corporation, No. CIV. A. 97-2988, 1998 WL 525802 at *1 (E.D. Pa. Aug. 21, 1998) ("The only federal appeals court to address the issue has held that Rule 62(d) does not authorize a stay pending an appeal from the denial of a Rule 60(b) motion. . . . Defendant offers no reason why the court should reject or ignore the Fifth Circuit's decision which has not been repudiated or criticized in any reported case or treatise.") (citation omitted); 2A FED. PROC. § 3:656 (Lawyer's Ed. 2003) ("Moreover, FRCP 62(d) gives the district court authority to stay only the order or judgment being appealed, and thus, . . . the Rule gives the court no authority to stay execution of the judgment pending appeal of the court's order disposing of [motions for relief from judgment]."); 5 AM. JUR.2d Appellate Review § 473 (2003) (same).
Although in the case at bar the appeal of the underlying judgment is still pending — in contrast to Zapata, where the underlying judgment (unsuccessfully appealed) was the judgment the court was asked to stay — this court sees no reason to diverge from the Fifth Circuit's interpretation of Rule 62(d). As explained above, the Fifth Circuit's interpretation of Rule 62(d) in Zapata was based on the language of Rule 62(d) itself, not on the fact that the appeal was on a Rule 60(b) motion, and not on the fact that the judgment the district court in that case improperly stayed was the underlying judgment. See Zapata, 941 F.2d at 295. Accordingly, whether it is unfair or burdensome to enforce the supersedeas bond in this case is irrelevant. Once the Fifth Circuit dismissed the appeal of the attorneys' fees award and issued its mandate, this court lost the power to stay the enforcement of the award. See Zapata, 941 F.2d at 295. The fact that the underlying appeal is still pending has no effect on this court's inability to stay the enforcement of the attorneys' fees award. Id.
In their briefs and their arguments at the hearing, both parties discussed FED. R. CIV. P. 60(b)(5) at some length. FED. R. CIV. P. 60(b)(5) and the related case law cited by both parties — specifically, California Medical Association v. Shalala, 207 F.3d 575, 577-79 (9th Cir. 2000), Mother Goose Nursery Schools, Inc. v. Sendak, 770 F.2d 668, 676 (7th Cir. 1985), and the more recent case of Flowers v. Southern Regional Physician Services, Inc., 286 F.3d 798, 801, 803 (5th Cir. 2002) — make it clear that FED. R. CIV. P. 60(b)(5) is an appropriate method for seeking relief from a judgment of attorney's fees once the underlying judgment has been reversed. Obviously, the appeal of the underlying judgment in this case has not yet been decided, rendering Rule 60(b)(5) and the above cited cases unhelpful in determining the issue before the court.
III. CONCLUSION
For the reasons discussed, Matisse's motion to enforce the supersedeas bond under FED. R. CIV. P. 65.1 is GRANTED. Matisse's motion to expedite consideration and ART's motion to strike are DENIED as moot.It is therefore ORDERED that American Realty Trust, Inc. as principal and Liberty Mutual Insurance Company as surety are liable on the supersedeas bond for the judgment rendered in this action against American Realty Trust, Inc. on April 9, 2003 in the amount of $1,162,446.50, plus post-judgment interest at the rate of 1.19% from the date of that judgment.
It is further ORDERED that Matisse Capital Partners, LLC is not entitled to recover attorneys' fees incurred in bringing this motion to enforce, as federal law does not allow for the recovery of attorney's fees in a motion brought under FED. R. CIV. P. 65.1 to enforce a bond posted under FED. R. ClV. P. 62(d). Bass v. First Pacific Networks, Inc., 219 F.3d 1052, 1055 (9th Cir. 2000).
It is further ORDERED that execution shall issue against American Realty Trust, Inc. or Liberty Mutual Insurance Company should either of them not timely pay the judgment of April 9, 2003.